However as a result of new government regulations impacting debit cards starting October 1, merchants accepting small ticket debit transactions are likely to experience higher rates.
MasterCard, Visa and Discover have all opted to support a two tiered debit Interchange pricing schedule for Fed regulated and exempt debit transactions. Yet in implementing the regulations, as discussed in … more
An it appears that the anticipated result of these actions will be to steer consumers away from debit and toward reward credit and charge card products that carry more expensive merchant Interchange rates.
"An Associated Press-GfK poll last month found that about two-thirds of consumers use debit cards more frequently than credit cards. When asked how they would react if they were charged a $3 monthly fee for their debit card, 61 percent said they'd find another way to pay. If the fee was $5 a month, two-thirds said they'd do the same. If the fee was $7, the figure rose to 81 percent."
Our concern for small … more
Under these new rules, debit card issuers must add at least one unaffiliated network to each debit card. For example, Visa has exclusive arrangements with issuers to use both its signature debit and PIN debit networks. Now debit card issuers will need to add an alternative network to Visa.
In response, Visa says they will implement a new Network Participation fee that will be based on a merchant's size and number of locations while at the same time lowering the variable rate charged per transaction. This Visa strategy is intended to … more
The biggest innovation coming soon to the paper check is the digital check. Keeping all the benefits of its paper form except the piece of paper, we expect the digital check will usher in big changes in the payments industry. more
The rule was slated to take effect on July 21, yet with less than one month to put in place all the mandated provisions, more time is required to implement these changes. For example, it will take … more
Now Visa is making a strategic investment in Square, a mobile payments start. Square's card readers plug into the iPhone jack for swiping cards and have been criticized for lacking encryption security. Perhaps with Visa's involvement they will address this issue given on the … more
While the purpose (encourage proper compliance with transaction authorization standards) of the two programs is similar, there are some differences in how they will monitor compliance. While both Visa and MasterCard will assess fees when authorized (approved) transactions cannot be matched to a clearing settlement record or an authorization reversal, Visa allows 10 days (20 days for T&E merchants) while MasterCard provides … more
In a post, The Durbin Chickens Start Coming Home to Roost we find this quote “What banks’ shying away from debit rewards is likely to do is shift volume away from debit cards to credit cards for those who pay with plastic.” Of course as merchants well know, credit and reward credit Interchange is substantially higher than debit Interchange today.
In December 2010 when the Fed issued a proposal to set a price cap on debit card Interchange fees under new powers from the Dodd-Frank Act, we warned that “without a compelling financial incentive to develop debit that issuing resources will move away from this product line. … more
According to the Wall Street Journal, U.S. banks are debating letting debit card transactions bounce like checks. And banks may charge more to merchants in order to guarantee debit card payments. While consumers could face bounce fees like they do for checks. Both developments could steer use away from debit cards to other forms of payment not regulated by Dodd-Frank.
In addition it was recently reported that banks are considering a $50 cap on debit card purchases.
Merchants that have relied on ATMs in store to avoid taking credit and debit card payments may soon find this strategy of steering customers to cash more difficult to implement as banks begin to increase ATM … more
At issue is the ability for criminals to use unencrypted card readers to steal full mag-stripe data which can then be use to make fraudulent purchases. Fraudulent card use is a problem for all merchants (and in particular card not present e-commerce merchants) who shoulder the losses.
Square has made headlines shipping hundreds of thousands of free dongles (square card readers that plug into the iPhone jack for swiping cards). In its announcement, VeriFone demonstrates how promulgating cheap readers enables criminals while making the point that the payments industry needs to take card data security seriously.& … more